Home and rent price increases to slow, economists predict

National home and rent price increases are expected to slow in the next two years, said a report of 51 economists and analysts released Tuesday.

Average home prices will increase by 5 percent in 2017 and 4 percent in 2018 — down from the 5.8 percent increase in 2015 and 5.1 percent this year, said the Urban Land Institute’s Real Estate Consensus Forecast.

Rent increases are also expected to slow down from the 4.5 percent rental increase in 2015 and 3.5 percent predicted for 2016, to 3 percent in 2017 and 2.9 percent in 2018.

But, what about San Diego?

Most local experts predict housing prices in America’s Finest City will not increase as much as the past few years, but it won’t be as low as the rest of the nation.

In CoStar’s third-quarter housing report for San Diego also released Wednesday, the real estate tracker forecasted San Diego rent would end up increasing 6.1 percent in 2016, 3.6 percent in 2017 and 3.4 percent in 2018.

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Alan Gin, economist at the University of San Diego, said CoStar’s housing numbers for San Diego County show the region will be outside what will happen in much of the nation.

“That’s a reasonable projection because construction is down for residential units,” he said. “Even if it declines from 6.1 percent to about 3.5 percent, that’s still above the rate of inflation.”

Greg Shannon, chair of the management committee for ULI’s San Diego and Tijuana branch, said San Diego is affected by strong job growth.

“As long as we’re creating new jobs but not creating much new housing supply, particularly apartments, we’re just going to see increases in pricing of housing,” he said. “San Diego is likely to have increases greater than the U.S. average across the board, particularly in rentals.”

However, he said the pace that rent goes up in San Diego should slow — just like the national average — because many renters will have hit their limit.

“When they go up this much, it’s just not sustainable,” Shannon said. “You’re already picking off people at the low end where an extra $25 a month does make a difference.”

Average rent was $1,743 a month in San Diego County at the start of September, increasing 8.4 percent in a year , said MarketPointe Realty Advisors. The median home price hit $498,000 in August, its highest point in a decade, real estate tracker CoreLogic said.

Overall, economists and analysts in the forecast predicted economic expansion would be at a slower pace than the prior two years with mixed projections for different factors affecting the housing market.

Additionally, nationwide apartment vacancy rates are predicted to rise to 5.3 percent by 2018, a sign that rentals will be slightly harder to fill. Right now, San Diego County has a 3.6 percent vacancy rate, CoStar says.